Many communities in the past left all marketing to developers, but the recent trend has been for cities to play an increasing role in marketing. Some cities take full responsibility for identifying buyers for affordable units. Others simply manage an interest list from which they refer eligible buyers to developers of inclusionary homes.
Builders of higher-end housing often struggle to develop appropriate marketing strategies that reach lower-income buyers who may not be otherwise in the market for homeownership opportunities.
Developers are motivated to eventually fill their units with income-eligible residents. However, if large segments of the lower-income community never hear about these open units, it may raise concerns about fair housing.
In particular, in communities where the population of income-eligible residents is largely people of color and/or non-English speaking, a project that did very limited marketing could end up with a mostly White group of residents because White households might be more likely to know the developers or households in the market-rate units.
Inclusionary programs address this either by imposing affirmative fair marketing requirements which outline steps developers must take to market to the entire community and specifically hard to reach populations or by taking a more active role themselves in marketing available units.
Like the initial marketing, cities have different levels of involvement in the resale marketing of individual homes.
Some programs ask homeowners selling their unit to find a new income-eligible buyer. These programs provide guidelines, and occasionally training, to help homeowners and their realtors fairly market the homes and to screen buyers.
Other programs prefer to take a more active role to ensure the homes are widely marketed and reach minority or underserved populations. Programs may keep a central interest list to which they market homes. Or the program manager and/or a realtor working directly for the program will advertise the unit and show it to buyers, educate buyers about the program restrictions, and screen them for eligibility. This more intensive approach avoids the potential for homeowners to arrange for side payments and ensures fair access to these units by all interested buyers.
Active engagement in sales is far more time intensive than merely monitoring sales. Among Community Land Trusts (CLTs), a survey by the Lincoln Institute found that 80 percent of CLTs are directly involved in marketing, and only 20 percent rely exclusively on direct sales from sellers to buyers with no involvement of the CLT.
San Francisco, California
San Francisco provides developers with a fill-in-the-blank marketing plan template for inclusionary homeownership units. The template addresses building and unit details, buyer qualifications, marketing strategy, selection, and lottery process. The form also provides sample language for flyers and ads and sample publications including for audiences of different ethnic backgrounds.
Marketing Standards – Rental
The majority of inclusionary programs rely heavily on property owners and their management companies to ensure ongoing compliance of inclusionary rental units, but many administrators report significant challenges with this approach.*
Programs frequently expect managers of rental properties with inclusionary units to market available units, screen applicants for program eligibility, document and annually recertify tenant incomes, and take action to address noncompliance. Many cities provide ongoing training for property managers to help them understand the rules they are charged with enforcing, and most undertake some level of monitoring for ensuring managers are applying the rules appropriately and equitably. For example, some programs impose affirmative fair marketing requirements which outline steps developers must take to market to the entire community—and specifically hard-to-reach populations—including requirements to make materials available in multiple languages. However, problems are still common.
Most property management companies have no experience with affordable housing programs, and it can be challenging to rely on them to enforce potentially complex public agency rules. As a result, a growing number of programs are centralizing some of these responsibilities, often in-house. Hickey, Sturtevant, and Thaden* describe how San Mateo, California centralized waiting lists and screening due to the high turnover of property managers. Now the city manages a single applicant pool and sends pre-screened tenants to property managers to fill vacancies.
New York, New York
New York has taken a different approach by requiring private developers to contract with a city-approved, third-party Administering Agent. These independent administrators are responsible for marketing units and ensuring that tenants are program eligible. In New York’s inclusionary program, property managers typically handle annual income recertification, but the Administering Agents relieve the city from the burden of supporting and monitoring hundreds of different property management companies. Of course, the city still has to monitor the independent administrators.
Chicago’s Affordable Requirements Ordinance rules state that developers shall use good faith and affirmative efforts to attract potential purchasers or tenants from all minority communities. Developers must schedule a marketing intake meeting with City staff and submit a completed marketing plan which must be approved by City staff. The marketing plan must describe how the developer’s commercial media plan will target diverse racial and ethnic groups. Developers are also encouraged to share information with the local Alderman’s office, as well as local housing counseling and other delegate agencies, so that they may promote the availability of the affordable units to the targeted populations.
While this is not common practice, several jurisdictions have programs that allow for or even encourage local housing authorities or nonprofits to purchase some inclusionary units.
For example, in Montgomery County, Maryland the public housing authority, called the Housing Opportunities Commission (HOC), has the option to purchase up to one third of all inclusionary units. The agency can offer approved nonprofits a 21-day period to opt to purchase any new units before they are offered to homeowners. The HOC has purchased more than 1,500 units in 188 subdivisions (out of more than 10,000 inclusionary units produced in the county) using a range of housing programs, including Section 8, Low Income Housing Tax Credits, and state rental funds. As a result of this partnership, Montgomery County has generally served a much higher share of low- and very low-income residents relative to other inclusionary housing programs across the country.
When homeowners are truly unable to sell their homes to income eligible buyers, many programs allow a “Right to Sell” provision so that owners are not trapped. Policies vary, but typically the home must be on the market for 90 to 180 days.
After a good faith effort, if they are unable to sell, the homeowners are generally allowed to sell the home to non-income qualified buyers. In some cases, this sale is allowed only at the affordable price. Other communities allow a market-rate resale but recapture any excess proceeds above what the seller would have received if they had sold at the affordable price.
If the unit pricing is set appropriately and units are adequately marketed, selling them should not be a problem. But if there is some dramatic economic shift during development or pricing is not appropriately set initially, it can be difficult and sometimes impossible for developers to find income-eligible buyers.
The Regional Housing Alliance of La Plata County, Colorado, which offers developers an in-lieu fee option as part of its ordinance, has built into its inclusionary housing regulations a clause that allows deed-restricted inclusionary units that have not sold at the specified below-market price after 120 days to revert to market price if the developer is willing to pay the specified cash in-lieu fee instead.
Jurisdictions facing this issue may need to revisit their pricing requirements; it could be that the initial pricing is too high to be affordable to low-income buyers. Similarly, they may need to evaluate the marketing efforts and assist developers in reaching the communities the housing was intended to target.